CFTC Invokes Emergency Authority to Keep Kalshi Trading as New York Seeks Shutdown

The Commodity Futures Trading Commission moved to keep prediction-market exchange Kalshi operating after the company declared a market emergency, issuing an order Tuesday that instructs KalshiEX to continue functioning as a designated contract market under the Commodity Exchange Act's core principles. The intervention lands as New York Attorney General Letitia James escalates a high-stakes challenge to event-contract trading. On July 31, James sued Kalshi and asked a court for a statewide injunction that would bar the platform from offering event contracts anywhere in the U.S., along with more than $36 billion in damages. Federal regulators argue the exchange is engaged in interstate financial activity—pairing bids and offers across state lines and centrally clearing trades—placing it under federal derivatives oversight rather than state gambling laws. CFTC Chair Michael Selig said New York is trying to "kill the market before judges rule," accusing the state of pushing event-contract derivatives to "waste away under its iron curtain of state gaming laws." He said Congress did not intend derivatives venues to be governed by a patchwork of state gaming regimes. The dispute is part of a widening legal campaign by the CFTC. The agency has sued nine states and filed amicus briefs in the Sixth and Ninth Circuits and at the Massachusetts Supreme Judicial Court. The roster has grown over the past year, beginning with Illinois, Arizona and Connecticut and later adding Wisconsin and Minnesota. President Donald Trump publicly endorsed the CFTC, calling state officials who oppose prediction markets "SCUM." Kalshi's courtroom results have been uneven. In the Southern District of New York, a judge denied the company's request for a preliminary injunction on July 7 and declined to shield it pending appeal on July 27. States have pursued separate actions as well: Michigan curtailed Kalshi's sports markets in June, and Washington obtained a preliminary injunction in July. Kalshi has also notched wins, including a Third Circuit victory in a dispute involving New Jersey and a separate win in Minnesota. In New York, James's petition alleges Kalshi is operating an unlicensed gambling business across eight counts. The filing seeks triple the company's gains and $100,000 for each sports-wagering offer. It points to Kalshi disclosures valuing the exchange at $22 billion and citing annualized trading volume of $178 billion. The CFTC's emergency order keeps the markets open for now. The underlying question—whether event contracts are primarily a federally regulated derivatives product or a state-policed form of gaming—appears headed for further litigation. The outcome could shape the regulatory perimeter for prediction markets and other cross-state financial venues, with implications for crypto and derivatives firms navigating overlapping state and federal rules.